As good a spot for this update as any. Obviously not directly related to PO. But certainly just one more element of the bigger picture of the POD:

The govt announced a lower royalty for new GOM leases. For !eases in 200 m water depth and less: was 18.75% reducing to 12.5%. Certainly in part due to lower oil prices. But the GOM above 600' (which pushes out to the edge of the shelf north of where the Deep Water plays begin) is a very mature trend. Completely shot with 3d seismic multiple times.

But some companies have been trying to develop a very deep play below 28,000' in shallow water close to the shoreline. Some huge IN PLACE reserves have been reported. But much of them may remain in place: the pressures and, in particular, the temperatures are so high the completion technology is right at the limit. A company spent over $220 million on its first well in the trend and eventually plugged it as unproducible. Not sure if the lower royalty combined with relatively low NG prince's is going to build enough enthusiasm.

Is the deep play still in the Tertiary wedge (Miocene)? I realize that most of the drilling has been post salt or on the flanks of diapirs but I expect this is sub-salt? New seismic imaging seems to be detailing that area much better than in the past. I do remember a few years back a company named McMoran drilled an ultra-deep well (+20,0000") but don't remember the results.

No. I think the idea is that the Miocene sands that produce in deep water will also be attractive on the shelf. But contrary to what you might normally believe the drilling depth will be deeper simply because it has all the overburden that the offshore doesn't. Simplification for sure. I don't know what they are chasing but I have not heard of any possible targets in the Eocene or the Late Cretaceous zones in shallow water, but then again I haven't been keeping up with what is going on. Rockman is basically a Texican/Coonass so I suspect he has a better idea.

The lead off batter in that play was McMoRan trying to develop the Davy Jones Field. Here's an update from 2013 frtom Forbes:

"We got an interesting update this week from McMoRan Exploration, America's ballsiest oil and gas explorer, on the status of the ultradeep wells it has drilled in the shallow waters of the Gulf of Mexico. Led by legendary geologist Jim Bob Moffett, McMoRan said in its new quarterly report that it has sunk a total of $1.2 billion to drill six behemoth wells, including Davy Jones, Blackbeard and Lafitte.

Moffett, as we've written before, is going after deeper reservoirs of natural gas than anyone has before -- more than 30,000 feet below sea level. McMoRan's exploration wells have indeed found bountiful quantities of hydrocarbons. But the trouble now is figuring out how to complete and produce these wells.

Davy Jones is perhaps the most watched well in the entire U.S. oil and gas industry right now. McMoRan has drilled two wells into the Davy Jones structure, discovering high-quality sandstone reservoirs of more than 300 feet thick and filled with natural gas. The reservoirs have been proven to stretch more than 2 miles across between the two Davy Jones wells."

"Freeport-McMoRan Inc. co-founder James “Jim Bob” Moffett’s last big gamble as head of the world’s largest copper miner was a $1.2 billion wrong-way bet six miles beneath the Louisiana coastline.Bloomberg reports Moffett, a legendary wildcatter and geologist whose credits include the gigantic Grasberg copper deposit in Indonesia, is stepping down as chairman and director at Freeport as the minerals, oil and gas producer turns to cutbacks and cash preservation amid a deepening commodities meltdown.

The 77-year-old Moffett in 2007 staked much of the company’s future on an obscure cluster of gas-soaked rocks, hidden beneath coastal Louisiana oil fields, that had been discarded by bigger operators including Exxon Mobil Corp. After seven years of drilling, Freeport in January suspended work on fields with names like Davy Jones and Blackbeard."

"PEOPLE call us pioneers. Well...some people say pioneers end up with arrows in their back.” So James “Jim Bob” Moffett, one of the great wildcatters of the past half-century, presaged his fate in 2012. On December 28th Freeport-McMoRan, the firm he founded and built into a global mining and oil giant, said he was stepping aside as executive chairman.

He seems to be the latest casualty of the “Icahn effect”, the toppling of larger-than-life entrepreneurs of the commodities boom after Carl Icahn, a veteran activist investor, buys stakes in their firms and seeks to shift their focus to cost-cutting. Though Mr Moffett, a geologist, found one of the world’s largest copper and gold mines, Grasberg, in the mountains of Indonesia, in 1988, his costly pursuit of the appropriately named Davy Jones gasfield in the Gulf of Mexico, as well as controversial takeovers, upset many shareholders. So did a 70% drop in Freeport’s share price during 2015"

Hmm, this post doesn't fit too well with the constant drum beat of "we have an oil glut":

July 28 (Reuters) - Physical crude markets are at last showing signs of tightening as record refinery consumption in the United States coincides with a slowdown in oil exports from the Middle East Gulf. U.S. refineries processed....an increase of 620,000 bopd compared with the same week. U.S. refineries are seeing higher demand for gasoline and diesel from Latin America where supplies have been hit by local refinery problems.

...Saudi Arabia has been restricting exports in recent weeks and has stated exports will be below 6.6 million bpd in August, compared with 7.3 million bopd in August 2016, and the lowest for the month since 2010. Saudi Arabia and Iraq both tend to export less during the summer because they use more crude domestically to burn in power plants to meet air conditioning demand.

The prospective reductions have left refiners scrambling to find replacement crude which is tightening the physical market for all grades.Demand for medium and heavy crudes, with a high yield of middle distillates, has been strong since the start of the year, helping narrow the light-heavy differential.

But intensive refinery runs during the second and third quarters have seen strong demand for light crudes as well, tightening the market for light oils, even as supplies from North America and Africa have increased.

One consequence is that commercial crude stocks in the United States have fallen more rapidly than normal at this time of year and are now below year-ago levels. The tightening supply-demand balance has been reflected in a sharp improvement in the calendar spreads for Brent crude for the remainder of 2017 and through 2018.

July 27 (Reuters) - Marathon Petroleum Corp processed a record 1.9 million bopd of crude oil at its seven U.S. refineries in the second quarter, fueled in part by robust refined product exports, the company's chief executive said on Thursday.

WARNING!!! WARNING!!! US security at risk given Russia's growing influence over Venezuela's Citgo refineries in the US. At least that was the headline of a recent rediculous story posted here. Turns out the Russians aren't the potential danger...it those damn evil Canadians that could deny the consumers of that huge output of Citgo's US refineries that represent a whopping 4% of total capacity. From

"Venezuela's Citgo Turns to Canada for oil. Its oil-supply woes are so dire that its U.S. refineries are turning to Canada for help. Citgo Petroleum Corp., the largest U.S. importer of Venezuelan oil and a unit of state-owned Petroleos de Venezuela SA, has started to make quiet inquiries to buy Canadian crude for its refineries in Texas and Louisiana. The imports would be used to replace dwindling shipments from Venezuela, where output dropped to a 14-year low in July.

Venezuela is shipping less to Citgo as it redirects more of its shrinking supply to China and India to repay loans. Canadian crude, equally heavy and high in sulfur as Venezuelan oil, is a natural replacement, said Dinara Millington, vice president of research at the Canadian Energy Research Institute in Calgary.

{FYI: Citco might buy oil sand reserves while still in the ground. But once produced it can't be pipelined to its US refineries with out first being diluted with condensate/light oil. IOW dilbit. Even then, at 23° API, it can't be run through US refineries that utilize 32° API oil so it has to be blended with even more condensate/light oil.}

“Canada would be in the best position because that volume would be more or less guaranteed,” Millington said."

{Only guaranteed if Citco signed long term purchase contracts. Contracts sellers might feel uncertain about given the financial condition of the Venezuelan company}

This would be the first time Citgo imports Canadian oil for its Lake Charles, Louisiana, and Corpus Christi, Texas, refineries in more than two years. Although Canada is the largest supplier of oil to the U.S., more than half of that is absorbed by plants in the Midwest. Limited pipeline connections and expensive rail make it hard for Canadian oil to reach buyers along the U.S. Gulf Coast, home to the world’s largest cluster of refineries.

Last week, U.S. imports from Venezuela fell to 507,000 barrels a day, the lowest level in five months, according to data from the U.S. Energy Information Administration. The latest monthly data show that Citgo’s Gulf refineries took 176,000 barrels a day from Venezuela in May, the least since December."

Bottom line: regardless of how the current turmoil in Venezuela progresses it will have no meaningful impact on US oil supplies. Despite efforts by others to broadcast otherwise.

Last edited by ROCKMAN on Fri 11 Aug 2017, 21:28:21, edited 1 time in total.

And the above post explains why the hyped potential ban of Venezuelan oil imports is just more bullsh*t from the MSM: even Venezuela's own US refinery, Citgo, isn't getting enough oil imported from Venezuela. Any oil the US doesn't import Russia, China and India could easily absorb. In fact given the increasing debt to those countries Venezuela may soon be required to cease exporting any oil to the US as it increases exports to those other countries as part of its loan agreements:

"The prospect of a U.S. blockade of crude oil imports from Venezuela has ignited fierce lobbying in Washington pitting domestic energy producers such as oil tycoon Harold Hamm, who favor a get-tough approach, against refiners that depend on those supplies.

Hamm said hitting Venezuelan President Nicolas Maduro where it counts would deter the socialist leader’s moves to undermine democracy and consolidate power. In an interview, the Continental Resources, Inc. chief executive officer urged President Donald Trump to block the oil, a vital source of revenue for Venezuela.

"If the president wants to make an immediate impact on Venezuela to stop these human rights abuses and restore the situation, he’s got the ability to," said Hamm, speaking as head of the Domestic Energy Producers Alliance, whose members include producers, oilfield service companies and independent oil and gas associations."